Pakistan has refused to allow free use of the Chinese yuan on the lines of the US dollar in the country as officials from the two nations met to decide on a long-term developmental plan under the USD 50 billion China- Pakistan Economic Corridor (CPEC), a media report said today.

The meeting of senior officials from Pakistan and China yesterday decided to formally move ahead despite hurdles and finance at least three special economic/industrial zones (SEZs) and some important rail, electricity and road projects.

The Dawn reported quoting a senior government official that Pakistan was not ready to allow the Chinese yuan (renminbi) for free use in Gwadar or its treatment on a par with the US dollar in the country and this was disappointing for the visiting Chinese officials.

He said the use of yuan for common use in any part of Pakistan or exchangeable like dollar has to be on a reciprocal basis.

The official also said the issue would be discussed again for some kind of institutional arrangement at the CPEC Joint Cooperation Committee (JCC) meeting today to be co-chaired by Interior Minister Ahsan Iqbal, who is also minister for planning and development reforms, and Wang Xiaotao, vice chairman of National Development and Reforms Commission (NDRC) of China.

The official said the USD 3.5 billion Karachi Circular Railway (KCR) project was also unlikely to be cleared for inclusion in the CPEC at this stage because of some unsettled issues between the two countries. The project is likely to be dropped for now.

Informed sources said the two sides appeared to have settled issues relating to USD 8.5 billion Karachi-Lahore- Peshawar Railway Line.

The discussions were positive and the two sides are also expected to sign agreements on actively promoted power projects.

They also agreed to include road projects such as the much-talked-about western route between Gwadar, Nawabshah, Zhob-D I Khan-Hakla under CPEC besides Karakoram Highway (KKH) in Gilgit-Baltistan.

ISLAMABAD: Pakistan has turned down China’s demand to allow its currency to be used in the Gwadar Free Zone under the China-Pakistan Economic Corridor framework, arguing any such move would compromise its ‘economic sovereignty’.

Pakistan conveyed its final position on the use of the foreign currency in its territory to the Chinese authorities during the Senior Officials Meeting (SOM) that was held on Monday in Islamabad, according to officials who were engaged in talks.

The SOM was held a day before the 7th meeting of the Joint Cooperation Committee (JCC) – the highest decision-making body of CPEC.

The Chinese authorities wanted to avoid currency exchange risks attached with the use of the US dollar and the Pak rupee.

The Ministry of Finance and the State Bank of Pakistan opposed the Chinese demand to allow use of RMB.

ISLAMABAD: Pakistan and China on Wednesday agreed on 15-year policy document that will translate the China-Pakistan Economic Corridor into a reality but both the countries could not end differences over two critical infrastructure projects amounting to $10 billion.

Unlike the past, this time Pakistan had to struggle hard to push its agenda amid domestic political uncertainty and China’s reluctance to commit for new projects. Progress on most of the items could not be achieved.

The framework agreement of $2 billion Karachi Circular Railways project and the financing agreement of $8.2 billion Main-Line-I of Pakistan Railways could not be signed during the 7th meeting of the Joint Cooperation Committee (JCC).

The design of $260 million New Gwadar International Airport could also not be finalised.

There was also a dispute over the site of setting up a Special Economic Zone in Khyber-Pakhtunkhwa, as Beijing was reluctant to accept the provincial government recommended Rashakai site in Mardan.

The only major outcome of the JCC was the agreement over the Long Term Plan (2014-2030) that is expected to translate the national economic plans of both the countries into one policy document covering all common grounds for the socioeconomic cooperation.

“The final agreement on the 2030 long-term plan has been achieved,” said the minister for planning and development after the JCC meeting.

Pakistan did not accept China’s demand to introduce Yuan in the country.

But Iqbal said Pakistan would explore the possibility of using the Chinese currency for making payments for capital imports for CPEC.

The LTP is the most critical element of the China-Pakistan economic relationship, as it lays the foundation of cooperation in all economic and financial areas for decades to come.

However, K-P Chief Minister Pervaiz Khattak expressed serious reservations over the LTP and the selection of the SEZ site in his province.

“K-P has been ignored in the plan and many important nodes like Hazara, Malakand, Peshawar and Dera Ismail Khan have not been included in the LTP,” said Khattak while talking to the media.

ISLAMABAD: The Senate was told on Friday that 91 per cent of the revenues to be generated from the Gwadar port as part of the China-Pakistan Economic Corridor (CPEC) would go to China, while the Gwadar Port Authority would get 9pc share in the income for the next 40 years.

This was disclosed by Federal Minister for Ports and Shipping Mir Hasil Bizenjo after senators expressed concern over the secrecy surrounding the CPEC long-term agreement plan, with many observing that the agreement tilted heavily in China’s favour.

The minister said that the agreement was based on a build-operate and transfer model spread over 40 years. That means that Pakistan will take over the operation of the port along with the infrastructure to be built on it during the period to enhance the port’s cargo-handling capacity.

However, Senator Kalsoom Parveen of the ruling Pakistan Muslim League-Nawaz (PML-N) pointed out that the agreement had not been signed on the basis of equality as had been done with India. She asked Senate Chairperson Raza Rabbani to convene a meeting of the committee of the whole of council, in which all relevant departments which signed the pact would be called. Mr Rabbani, however, pointed out that there were already two committees on the CPEC, including a Senate committee and a parliamentary panel. He advised her to take up the issue at the Senate committee on CPEC.

China will bag a 91% share in gross revenues from Gwadar port, in Pakistan’s Balochistan province, and 85% from the surrounding “free zone,” under a 40-year deal finalized by Pakistani authorities with the China Overseas Port Holding Company.

The numbers were revealed by Pakistan’s federal minister for ports and shipping, Mir Hasil Bizenjo, in the Pakistan Senate last Friday. He also disclosed that Pakistan will pay back US$16 billion in loans obtained from Chinese banks for the development of Gwadar port, the free-trade zone and all communications infrastructure, at rates of over 13%, inclusive of 7% insurance charges.

The project forms part of the US$56 billion China-Pakistan Economic Corridor (CPEC). Business figures say China will recoup its entire CPEC expenditure in the first four years out of earnings from Gwadar port –which was inaugurated a year ago – and the free zone.

Bizenjo added that the Chinese port holding company will operate the port over the next 40 years through a BOT (build-operate-transfer) arrangement. Pakistan will take over the port’s operation, along with responsibility for infrastructure maintenance, after the expiry date.

The minister’s disclosure comes on the heels of persistent demands from lawmakers for details of the long-term agreements inked with the Chinese authorities to be revealed, amid accusations that the federal government had attempted to sweep them under the carpet.

“Such deals need input from the private sector and the government should have involved the trade organizations before signing deals of national significance”

Most senators are of the belief that the long-term agreements are heavily tilted toward China. Raza Rabbani, who is chairman of the Pakistan parliament’s upper house, bowed to pressure from lawmakers and directed the Senate Standing Committee on CEPC to look into whether Pakistan’s national interests are undermined by financial obligations entered into via the agreement with China.

Pakistan Tehreek-e- Insaaf Senator Mohsin Aziz, who could not be reached for comment by Asia Times, is of the view that the long-term contracts entered into in relation to CPEC most certainly do undermine the national interest. “Such deals need input from the private sector and the government should have involved the trade organizations before signing deals of national significance,” he told the Senate, adding that the private sector would have been able to negotiate better deals for Pakistan than its bureaucrats.

Business leaders are indeed skeptical of the agreement’s 40-year term, stressing, in particular, that the infrastructure, roads, machinery and plant is unlikely to remain in workable condition in four decades. By the time Pakistan takes over responsibility for its maintenance, they say, it will need significant upgrading.

Muhammad Ishaq, a leading importer and one-time director of the Khyber Pakhtunkhwa Board of Investment & Trade (KPBOIT) told Asia
Times: “The hefty share in the revenue of port and free economic zone is not the only issue which will deal a severe blow to economy. The government also allowed contractors and sub-contractors associated with China Overseas Port Holding Company an exemption from income and sales taxes, and federal excise duties, for a period of 20 years, besides a 40-year tax holiday granted for imports of equipment, material, plant, appliances and accessories for port and special economic zone.”

He added that major shares of the earnings from the port and free zone would go to Chinese companies, while Pakistan will struggle to service costly loans obtained from Chinese banks. The 2,282-acre free zone, he said, will include factories, logistics hubs, warehousing facilities and display centers that will all be exempt both from customs duties and from provincial and federal taxes.

Provincial Minister for Higher Education, Raza Haider Gilani said that the income generated from toll plazas on 2,400 kilometer long Gwadar-Khanjrab route of China-Pakistan Economic Corridor(CPEC ) and its rail service and 120 berths of Gwadar Port would be more than annual financial budget of Pakistan. He further said that after completely functioning of Gwadar deep sea port and CPEC, US dollar would be available at Pk Rs 1.75, as saying, due to 67 berths at Dubai Port, US dollar was available at UAE Dirham 3.31. “Value of US dollar will decline at amazing level as 120 berths of Gwadar deep sea port and CPEC route completely start functioning,” he said.

He was addressing 12th Convocation at Islamia University Bahawalpur, here on Wednesday that was attended by Vice Chancellor, IUB, Prof-Dr. Qaisar Mushtaq, deans of faculties, academicians and hundreds of students. He said that Dubai port has 67 berths and added that ships anchored in deep sea instead at dock of Dubai port as anchoring of ships at berths was not available at Dubai port. “Instead, Gwadar deep sea port having 120 berths provided with facility to ships to be anchored at berths due to its deep sea,” he said. He said that US dollar was available at UAE Dirham 3.31 due to international importance of Dubai port and added that Gwadar port was going to become more important than Dubai port.

He said that some western and neighboring countries had perceived that complete functioning of Gwadar deep sea port and CPEC would damage their economies including their currencies and added therefore, these forces had started to oppose Gwadar port and CPEC and putting hurdles in complete execution of Gwadar port and CPEC. The Minister said that under CPEC, US dollar 35 billions were being spent on power generation projects in Pakistan, adding that Sahiwal power plant was part of CPEC. “Pakistan will have several new industries that would be part of CPEC,” he said. He claimed that in second phase of CPEC, a road would be constructed to connect Pakistan with Europe. “A road will be constructed to connect our country with Europe to increase trade activities,” he said.

Advising graduates of the convocation, he said that they should make a specific mindset of hard working instead adopting short cuts. “People of western countries consider themselves as best nations of the world as they believe in hard working instead short cuts,” he said. “We will have to be positive mind people by leaving short cuts,” he said. Criticizing western culture, he said that western countries take Pakistani immigrants as aliens.

China has decided to temporarily stop funding at least three major road projects in Pakistan, being built as part of the USD 50 billion China-Pakistan Economic Corridor, following reports of corruption, a decision that has left officials in Islamabad "stunned", a media report said today.

The decision by the Chinese government is likely hit over Rs 1 trillion-worth road projects of the Pakistan's National Highway Authority (NHA), and initially, may delay at least three such ventures, Dawn newspaper reported.

According to a senior government official, the funds would be released after Beijing issues 'new guidelines'.

The road projects that are likely to be affected include 210-km-long Dera Ismail Khan-Zhob Road, being built at an estimated cost of Rs 81 billion. Of this, Rs 66 billion would be spent on construction of road while Rs 15 billion on land acquisition.

The other project which is going to be hit is 110-km-long Khuzdar-Basima Road, having an estimated cost of Rs 19.76 billion.

The third project is Rs 8.5 billion worth, the remaining 136-km of Karakarom Highway (KKH) from Raikot to Thakot.

Originally, all the three projects were part of the Pakistan government's own development programme, but in December 2016, the NHA spokesperson had announced that they would be included under the CPEC umbrella so as to become eligible for concessionary finance from China.

"The funds for the three road projects were approved in the 6th Joint Cooperation Committee meeting held last year, pending necessary procedural formalities.

"It was expected that the funding of the three projects would be finalised during the Joint Working Group (JWG) meeting held on November 20, but Pakistan was informed in the meeting that 'new guidelines' will be issued from Beijing under which new modus operandi for release of the funds will be described," the official was quoted as saying by the newspaper.

The decision of the Chinese government was conveyed to Pakistan in the JWG meeting and the existing procedure for release of funds had been abolished, he said.

Under the previous procedure, the projects were to be approved by six different forums after which the funds were released, the official added.

"In fact, the Chinese authorities informed us that the previous procedure of release of funds was meant for early harvest projects only and new guidelines will be issued for future projects of the CPEC," the official said.

The official said the Pakistani side was left "stunned" when informed about this development, as it was the first time they were hearing it.

He, however, claimed that Chinese side was quite disturbed with media reports, published in Pakistan, about corruption in the CPEC projects and and that was the reason Beijing has temporarily halted release of funds for the corridor.